OECD kpcdb

1. Scope

 

Section 47 prohibits a person from acquiring assets of a business or shares if the acquisition has or is likely to have the effect of substantially lessening competition in a market.

 

2. Clearance or authorisation

 

New Zealand's merger clearance regime is voluntary. It means that parties to a merger are not required to notify the Commission of the merger. 

 

Under Part 5 of the Commerce Act the Commission can review potentially anti-competitive mergers or arrangements:

 

• where organisations wish to enter into an acquisition or merger, the Commission can grant a clearance. This will only be granted where it is satisfied that the proposed acquisition will not have or would not be likely to have the effect of substantially lessening competition in a market; and 
• where organisations wish to enter into an agreement or merger that leads to anti-competitive outcomes, the Commission can grant an authorisation. Authorisations will not be granted unless the Commission is satisfied that the benefit to the public would outweigh the lessening in competition that would result, or be likely to result. 
• Where merger parties have not sought clearance or authorisation and the Commission has concerns that the merger may substantially lessen competition, the Commission may initiate an investigation under section 47.

 

3. Procedural Rules

 

There is no Phase I/Phase II distinction in New Zealand. When considering merger clearance applications, the process has the following stages: pre-clearance, the clearance application, the Commission’s investigation and determination, and post-determination (Mergers and Acquisitions Guidelines 2013).

 

The Act sets out a 40 day statutory timeframe in which the merger must be either cleared or prohibited, unless an alternative timeframe is agreed with the applicant.

 

Procedural fairness: Throughout the investigation the Commission keeps in regular contact with the applicant about progress (Mergers and Acquisitions Guidelines).

 

As part of the Commission’s processes, the Commission often issues a Letter of Issues which sets out the Commission’s initial competition concerns and invites submissions from and meetings with the applicant. Where these concerns remain, the Commission sends a Letter of Unresolved Issues, invites submissions and holds a meeting.

 

4. Assessment

 

The Commission assesses mergers using the substantial lessening of competition test. This test seeks to determine whether a merger is likely to substantially lessen competition by comparing the likely state of competition if the merger proceeds with the likely state of competition if the merger does not proceed. A lessening of competition is generally the same as an increase in market power – the ability to raise price above the price that would exist in a competitive market (the ‘competitive price’),or reduce non-price factors such as quality or service below competitive levels. Only a lessening of competition that is substantial is prohibited under the Commerce Act. The Commission considers a substantial lessening of competition to be a lessening of competition that will adversely affect consumers in the market in a material way. 

 

The Mergers and Acquisitions Guidelines provide “concentration indicators” and indicate that a merger is unlikely to require a clearance where: the post-merger combined market share of the three largest firms in the market is less than 70% and the combined market share of the merging parties is less than 40%; and/or the post-merger combined market share of the three largest firms in the market is 70% or more and the combined market share of the merging parties is less than 20%.

 

However, the Guidelines provide that market share is one of the factors considered and not sufficient in itself to establish whether a merger is likely to result in substantially lessening competition.

 

As to the price increase, the High Court has noted that a price increase of 4-5% provides a general indication regarding a ‘substantial’ lessening of competition.

 

5. Remedies and sanctions

 

Under Sections 83, 84 and 85, the Commission may ask the Court to apply an injunction restraining further implementation of a transaction, divestiture of assets or shares and/or a penalty. The High Court decides whether a merger is likely to substantially lessen competition.

 

According to Section 83, the Court may order a person who has contravened Section 47 to pay a pecuniary penalty as follows: 

 

a)  individual: up to NZD 500,000 (approximately USD 355,450)

b)  body corporate: up to NZD 5 million (approximately USD 3.55M)